Key Legal Considerations Before Starting a Business
There are many important aspects to consider before launching your own business, and some of the most critical are a wide range of legal issues. Michael P. Dunn, Esq., partner at Dunn Law, P.A., offers the following legal advice before starting a business:
To ensure that the business and its assets are properly protected ― such as maintaining adequate insurance, preserving the company’s intellectual property, etc. ― several actions should be taken:
- Many of the legal considerations before starting a business include the business’s ownership, industry, objectives, risks, regulatory requirements, capital structure, and financing needs. The business owner must select a type of entity (corporation, LLC, partnership, limited partnership, LLP, sole proprietorship).
- The founder(s) must decide how the relationships will be defined between key participants such as owners, investors, lenders, officers, etc. in the company’s corporate documents. These documents include articles of organization, operating agreement, partnership agreement, shareholder agreement, financing/investment documents; and compliance considerations such as proper licenses, zoning, and other regulatory or governmental filings.
Licensing and zoning before starting a business is very specific to industry, scope of the business, and state(s) and municipalities where the business is located and doing business. Understanding the regulatory compliance landscape for a business is a vital consideration when getting started.
Before hiring employees, the founder(s) needs to be clear on federal, state, and local requirements for employees, setting up proper worker’s compensation, tax and payroll, benefits, and getting applicable local registrations and licenses. It is very helpful to have clear parameters for the relationship between employer/employee and scope of employment, which define expectations, and respective rights of the employer and employee.
Regarding taxes and insurance, it’s imperative to speak with professionals in both tax and insurance matters before setting up a business. Compliance and risk management are critical from the beginning, as these types of items can completely disrupt a new business, even if everything else is running smoothly in the company’s operations.